General overview for investors in Hungary s energy market

Transcription

1 General overview for investors in Hungary s energy market WHY INVEST IN THE HUNGARIAN GREEN INDUSTRY? Competitive investment environment Competitive energy prices Favorable implementation costs Government commitment in the areas of sustainability and energy efficiency Significant governmental investment plans, continuously developing environment Ambitious renewable target (13% by 2020) active area, regarding regulation, state support, technological innovations and investment opportunity Advancing feed-in-tariff system for renewable energy sources Availability of state and European Union funds Implementation of single energy market currently in progress in the EU

2 GENERAL OVERVIEW 3rd Energy Package has been carried out The liberalization of the Hungarian electricity and natural gas market was completed in Today the free choice of supplier applies for every consumer, although the prices for universal suppliers are still regulated. As far as European Union legislation is concerned, the application of the 3rd Energy Package has been carried out. High energy import dependency The major part of Hungary s energy supply is imported, and it will remain so for a long time. In % (716 PJ) of the total primary consumption (999 PJ) was imported. According to the forecasts, overall energy consumption will increase in the coming years. Hydrocarbon based energy mix Natural gas and oil products play the most important role in Hungary s energy consumption and accounts for 56,9% in High RES potential Renewable energy sources (RES) play an increasingly important role in the consumption mix. The share of RES in the total gross energy consumption rose to 14.5% in The main contributor being bio-mass based power generation. In addition, geothermal generation is forecast to expand in Hungary and increase in the coming years. Primer energy consumption in 2015 Combustible renewables and waste Nuclear power 16.4% 11.8% 9.3% Coal Electricity import-export balance 4.7% 0.5 % Other non combustible renewables 0.2 % Wind power 0.1 % Hydropower Crude oil and petroleum products 27.2% 29.7% Natural gas

3 ELECTRICITY MARKET Stabile network infrastructure Stabile network infrastructure and international connections (further developments in progress). Development and operation of the Hungarian transmission system is carried out by MAVIR Hungarian Independent Transmission Operator Company Ltd. Good regional cooperation (Czech, Slovak, Hungarian and Romanian day-ahead electricity markets integrated). Decreasing installed capacity The installed total capacity of Hungarian power stations is about MW. Electricity production capacity is continuously decreasing mainly due to the age of power plants. The government s goal is to expand domestic production capacity. Gross electricity generation in Hungary in 2015 totalled 30.3 TWh, with the gross consumption reaching 41.8 TWh. In 2015, the import ratio was 31.28%. The main import partners are Slovakia and Ukraine; while the main export partner is Croatia (north south direction flow). Total gross electricity consumption, generation of domestic power plants and ratio of import energy ( ) TWh % year Gross energy consumption of Hungarian Electricity System (TWh) Generation of domestic power plants (TWh) Ration import energy (%) (Source: MAVIR VER 2015, Data of the Hungarian Electricity System)

4 High market concentration The production and wholesale market concentration is relatively high, incumbent players such as MVM, E.ON, RWE dominate the market. Important role of nuclear energy The resource side of the Hungarian electricity system is still dominated by the Paks Nuclear Power Plant, which accounts for more than 50% of the total domestic production. Paks II Nuclear Power plant with MW installed capacity is in the preparation phase. Gross electricity production in 2015 Coal: GWh Natural gas: GWh Crude oil and petroleum prod.: 78 GWh Renewables Biomass: 1661 GWh Nuclear power: GWh Biogas: 293 GWh Waste: 207 GWh Other combustible: 204 GWh Hydropower: 234 GWh Wind power: 234 GWh Solar energy: 123 GWh (Source: Hungarian Energy and Public Utility Regulatory Authority) Price regulated residential sector The residential sector is under price regulation, and just a small number of households enter the competitive market. ENKSZ, the national public utility company acquired DÉMÁSZ Ltd. (DSO), and have a universal service license for the whole country. Competitive supply market There are over 150 certified suppliers on the market, out of which are actively present. Advanced power exchange (HUPX) with continuously growing traded volume (HUPX - physical futures, day ahead, and intraday market).

5 NATURAL GAS MARKET Decreasing consumption Hungary s annual natural gas consumption has been gradually declining in recent years, it was 12.6 billion m 3 in 2010, but in 2015 it dropped to 8.9 billion m 3 (307 PJ). As a result of the fact that a major proportion of natural gas is used for heating purposes, consumption is mainly seasonal. The primary reason was to reduce electricity generation from natural gas and decrease residential consumption. Energy security and diversification of sources has become a priority issue within the country and also for the EU. High dependency on imports In recent years 20-25% of the Hungarian natural gas consumption was secured from domestic production (57 PJ in 2015) and the rest was imported (238 PJ in 2015) from Ukraine and Austria. Available grid and storage capacity The Hungarian natural gas system is a well-developed and more modern one than the other European systems (the system has been built up during the last 30 years). Taking into account current consumption trends, the domestic gas supply and storage system is significantly over-sized, thus there are available capacities. The Hungarian natural gas grid is 5,783 km s long, operated by FGSZ Natural Gas Transmission Ltd., a company owned by MOL Hungarian Oil Company. Hungary has six interconnection points, and by regional comparison high storage capacities (6.330 Mm 3 ). Price regulated residential sector The residential sector is under price regulation, and just a small number of households enter the competitive market. Household consumers under universal service was Mm 3 in On the liberalized market Mm 3 of gas was sold in ENKSZ, the national public utility company acquired FŐGÁZ Ltd. (DSO) and have a universal service license for the whole country. Developing a trading and retail market The market-concentration is high. On the wholesale market just three companies had more than a 5% market share, and this number was six in the non-household, and four in the household segment in The suppliers achieved revenues of 365, 910 million HUF on the liberalized market in The liquidity of the Hungarian gas exchange (CEEGEX) is growing steadily.

6 RENEWABLE ENERGY MARKET (RES) AND GREEN INDUSTRIES Hungary has excellent comparative assets in certain areas of green energy sources. Considering Hungary s geographical conditions, of the renewable energy sources, energy generation from biogenic sources (forestry and agricultural biomass, biogas and biofuels), water, geothermal energy and, in the long term, solar energy, are the most important. Hungary s renewable generation at present is dominated by biomass. The number and installed capacity of household small power plants has significantly grown in the last few years increasing from 0.51 MW (2008) and exceeding 128 MW by the end of Hungary s 2020 RES target is 13%. However, in the National Renewable Action Plan, the government has set a target of 14.65%. Renewable energy support scheme In Hungary, the government traditionally supports renewable electricity production with a Feed-in Tariff System and guaranteed price, but from 2017 based on EU legislation the system is changing. The main features of the new system: under 0.5 MW feed in the tariff system and guaranteed prices remain in place (available budget until billion HUF); for power plants between 0.5 and 1 MW (except wind) premium prices can be given without a tendering process (available budget until billion HUF); above 1 MW power plants and all wind technologies can be supported through a tendering system (available budget until billion HUF): producers selling on the market; have to take the cost of schedule differences; support / premium price = offered price reference market price; HEPURA (Energy Office) tender request; MAVIR ZRt. (TSO) manages the system.

7 Biofuel Hungary has a large potential in biofuel production, supported by agricultural products. Based on an estimation by experts, more than 10% of the estimated consumption can be fulfilled just from first generation biofuels by 2020, while at the same time ensuring the fulfilment of food and feed provision objectives. With the emergence of second generation biofuels, through the expansion of the scope of raw materials, this volume could be increased even further depending on the seasonal variations in the amounts of agricultural production. At present in Hungary there are two operating bioethanol producers, namely the Pannónia Ethanol Zrt. plant (year of opening: 2012), and the Hungrana Zrt plant. Both are operating profitably with their products exported to the German market. Biomass and biogas Hungary has excellent agro-ecological conditions for a competitive production of biomass. Hungarian agriculture is capable of sustainably producing biomass in excess of food and feed demands, and at the same time there is significant biogas production potential. The theoretical potential of energy sources of biological origin (bioenergy) could exceed, by as much as 20% of the energy source demand estimated for 2020, and bioenergy based electricity production can be planned well in advance, and is also controllable. Therefore, the limitations of the production of bioenergy mainly lie in competitiveness. Bioenergy can primarily play a more important part in fulfilling local heating demands in the future, but emphasis will also be placed on the proliferation of small and medium-capacity combined electricity and heat generating systems, according to Hungary s Renewable Energy Utilization Action Plan. Waste management In Hungary, about four million tons of waste is generated every year, of which nearly 2/3 (2.6 million tons) is disposed of in landfills, 0.4 million tons is incinerated (in Budapest and in the Rákospalota incineration plant), and the remaining one million tons are recycled. The waste collection services and disposal is managed by a state owned company (NHKV Zrt.) The government s main goals are: to decrease the volume of disposal; to increase energy based utilization (biogas recovery, co-incineration); to raise the volume of recycling.

8 Solar There is significant solar potential in Hungary, with nearly 2,100 sunlit hours annually, which in some summer hot periods reaches a value of 1,000 W/m 2. Hungary s biggest photovoltaic power plant, with a capacity of 16 MWp, opened in October 2015, on the premises of and owned by Mátrai Power Plant, the largest coal-fired power plant in the country. Apart from this, only a small amount of solar capacity has been created, mostly through solar collectors. In 2016 MVM Group constructed a photovoltaic power plant with 10 MWp of capacity in Pécs. State and Union-level support plays a central role in the proliferation of solar energy systems. Hydro Hungary has traditionally utilized hydro-energy up to the last century, and turned its attention back towards this again during the 1950 s. Actively operating hydro power plants today in total represent a 50 MW production capacity, capable of generating around 200 GWh energy annually. Geothermal Hungary has excellent geothermal conditions, outstanding natural resources of thermal water; and there are huge thermal wells both on the Great Hungarian Plain and the Little Alföld. Hungary s geothermal gradient (42-45 C/km) is also higher than the global average. The heat content of thermal water is also outstanding. Its temperature exceeds C in many areas, and the same amount of heat that can be gained from this is considerably cheaper than from natural gas. Wind The climate in Hungary is humid continental, and the prevailing winds mainly blow from the rim of the basin towards the central parts. The most optimal regions for the exploitation of wind energy are mainly in the country s North, North-West, and some South-East areas. The connection of wind energy to the Hungarian electricity system began in 2006, when the Hungarian Energy Office opened a 330 MW capacity quota for wind energy. This amount has not been extended since. Today there are over 170 wind turbines in the country, with a growing trend for wind energy generated electricity. As far as wind is concerned, the National Renewable Action Plan foresees around 750 MW built in capacity and 1,500 GWh annual electricity generation by 2020.

9 SUCCESS STORIES FROM THE ENERGY SECTOR 16 MW Photovoltaic power plant As the largest coal-fired power plant in Hungary Matrai Power Plant has opened the way to the innovative connection of traditional and renewable energy generation. The new power generating facility was developed by the majority owner of the Matrai Power Plant, German energy company RWE. The costs of the power plant reached EUR 20 Million, nearly half of which is covered from development tax related allowance. ALTEO Group The company was established in 2008, defining energy generation as its main activity. In the following year ALTEO, with a license from the Hungarian Energy Office, launched energy trading activity that produced outstanding sales revenues even in the first year and then continuously increased its customer base and the amount of electric energy it sold. ALTEO group currently owns 11 power plants with a total of 36.5 MWe nominal installed electric generating capacity, and 237 MWth nominal installed heat generating capacity. In October 2010, ALTEO shares were launched on the Budapest Stock Exchange. In June 2011, the Hungarian Financial Supervisory Authority approved ALTEO s bond program with a total nominal value of two billion HUF.

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